You can't always change your insurer

It's not easy when someone in the family expires. It's even worse when one has to go through complicated procedures to claim the sum assured. No wonder, most complaints filed with the Insurance Regulatory and Development Authority (Irda) are to do with late settlement of death claims.

Often, one is not even aware how to claim the sum assured and in what manner. Insurers, nowadays, have various options. One can take the money in lumpsum or in monthly, quarterly or half yearly instalments.

Companies offer different options for both, pure insurance or term plans and traditional – money back or endowment – policies. For instance, if you buy Bharti AXA Life's 'eProtect' term plan, then in case of a death claim the insurer will pay the family Rs 1 lakh within 48 hours. This would help the insured's family, if there are any immediate expenses to be made. The rest of the sum assured will be paid after that.

On the other hand, DLF Pramerica's 'Family Income Plan', also a protection plan, gives the option to choose from a regular monthly income or a lumpsum benefit in case the policyholder dies. This would work best for a family who has dependents and needs regular income over a lumpsum.

Since the choice and flexibility (of choosing the required claim settlement option) from term plans is limited, experts say many first time insurance buyers prefer an income benefit (traditional) plan over a term product.

In case of traditional plans, IDBI Federal offers a standalone 'Incomesurance' plan which gives a guaranteed annual payout and allows one to choose their own payout options. Kotak Life Insurance, Bharti AXA Life Insurance and Bajaj Allianz Life Insurance are few other players, which offer similar plans.

G V Nageswara Rao, managing director and chief executive officer at IDBI Federal Life Insurance says, most buy these products because individuals look for maturity benefits which are paid over years. "The option of getting a monthly or annual pay out after the plan matures is another attraction."

So how do these plans work? These are typically endowment and moneyback policies where you can choose your premium paying term. But there is a catch. One has to buy a rider because in case there is a death before the product matures, then you will only get the sum assured and not the annual payouts on maturity.

Riders can cost about 10 to 20 per cent of the total premium payable. Most of these don't opt for riders, but it's highly recommended to buy it, so as to not lose out on the future payouts.

Once you buy the premium waiver rider, and the policyholder dies before the plan matures, then the insurer will pay the remaining premiums and your family can continue receiving payouts.

Under the unit linked insurance plans (Ulips), the increasing benefit claim settlement option is more preferred where the person is paid the fund value in addition to the sum assured. Whereas, the level benefit is where either the sum assured or the fund value whichever is higher is paid. Experts say customers whose objective of investing in Ulips is only wealth creation go for the level benefit option.

Claim settlement options have to be chosen based on the policyholder's age, profile and his financial needs in future. As A S Rajesh, vice-president , Bharti AXA Life Insurance says the amount one would require monthly/annually after the plan matures has to be decided first. "Our 'family income secure' traditional plan gives an option to choose the maturity amount either in lumpsum or spread across years on an annual basis."

Choose the right product to ensure that the death or survival benefits for different kinds of insurance products come to you on time.